Six wealth planning strategies for turbulent markets

Six wealth planning strategies for turbulent markets

How investors react during these periods of decline is critical to their long-term success.

The pandemic continues to wreak havoc on global markets, leaving investors wondering how long this roller coaster ride will continue, and whether they need to get off at the next stop.

Even some investors who have traditionally made all the right moves, such as investing for the long term and keeping their portfolios diversified, are feeling alarmed. “These are really unprecedented times, and it's normal to feel a little panicky," says Angie O'Leary, head of wealth planning at RBC Wealth Management-U.S. “It's even scarier because people are isolated at home, and that adds fuel to the fire."

It is important to remember, just as markets have recovered in the past, this too shall pass. Markets typically experience a ten to 20 percent correction roughly every one to two years. Indeed, over the course of history, the financial markets have experienced many corrections - typically defined as a decline of at least ten percent from recent highs - and each time, eventually recovered lost ground and moved to new heights. Not even the global Spanish flu pandemic in 1918 took out the global markets.

Instead of making knee-jerk reactions, investors should take time to consider their long-term plans and take deliberate steps that can further their long-term goals. “We can't control what's going on in the market, but we as investors are not completely powerless," O'Leary says. “There are things we can do to strengthen our financial heal in a down market."

Consider these six important strategies that may make sense for you and your portfolio during market turbulence.

1. Revisit your wealth plan with your financial advisor. Even if you have a solid plan, you should be prepared for your net worth to take a hit, depending on your asset allocation. But as long as you stay invested, the loss is merely a paper loss, and doesn't become a realized loss until you sell. History tells us that recoveries happen and the best offense is a good defense that holds the line.

2. Consider opportunities within your portfolio to tactically harvest losses for tax purposes. This can be especially impactful if you have realized gains and see an opportunity to trade up in quality, growth potential or even to better align your portfolio with your personal values.

3. Retirees and near-retirees should conduct an income check-up and revisit spending priorities. Consider a liquidity plan that includes access to credit and lending, which can be a vital safety net if you are unable to tap into your other sources of funds because they are more illiquid or inaccessible.

4. Consider a Roth IRA conversion. The drop in portfolio values and potential lower personal income for 2020 - along with the elimination of the stretch IRA - make a Roth conversion a consideration for many people. Your financial advisor can help you assess if this strategy is right for you.

5. Lower your tax bill through charitable contributions to organizations. A growing number are in desperate need of funding as many of the avenues they normally rely on, such as conferences or events, have been cancelled or postponed in the wake of the spread of COVID-19.

6. Look at your estate value. Consider timely strategies that work well in down markets, such as annual gifting using depressed stock, or trust strategies such as a Grantor Retained Annuity Trust.

The bottom line

Focus on your plan, not on the market. Don't jeopardize your long-term investment strategy out of fear. If you've created a strategy that reflects your risk tolerance, time horizon and financial goals, and you make the relevant adjustments over time, you'll give yourself the ability to look past today's headlines.

<p>Past performance does not guarantee future results.</p> <p>Investment and insurance products offered through RBC Wealth Management are not insured by the FDIC or any other federal government agency, are not deposits or other obligations of, or guaranteed by, a bank or any bank affiliate, and are subject to investment risks, including possible loss of the principal amount invested.</p>

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